Ford: Do We Scratch F-1?

July 23, 2002 Dearborn, Michigan Bloomberg reported that Ford Motor Co. executives are debating whether to keep its Formula One racing team as the second-largest automaker reduces costs and the team struggles, Chief Financial Officer Allan Gilmour said.

"If you want to raise blood pressure around here, you'll do it when you discuss Formula One because there are no neutral people," Gilmour said in an interview Friday. One side argues that "this is a high, high visibility sport related to automotive products. The other view is no, we don't need to be doing this. It is interesting and exciting but it's terribly expensive."

Gilmour wouldn't say how much Ford spends on its Formula One team, bought from former race driver Jackie Stewart in 1999. Automakers invest in the sport to help boost their images and test technology. Fiat SpA, DaimlerChrysler AG, Renault SA and Toyota Motor Corp. also own all or parts of teams, and Bayerische Motoren Werke AG and Honda Motor Co. supply engines to racers.

"There is no advantage to it from a North American standpoint," said Jim Gillette, vice president of IRN Inc., a Grand Rapids, Michigan-based consultant to parts makers on vehicle sales and production plans. "People just don't follow it."

British Broadcasting Corp.'s BBC Sport in a preview of the 2002 season on its Web site estimated Ford spends more than 100 million pounds ($158 million) a year on Formula One racing. Ford didn't say how much it paid for its U.K.-based team in 1999. Renault SA paid $120 million when it bought Benetton Group SpA's Formula One team in 2000.

Niki Lauda, head of Ford's team, said in January that the automaker would bankroll the racing effort for five more years.

Cutting costs

Ford had second-quarter net income of $570 million, ending a streak of four quarterly losses. The Dearborn, Michigan-based company lost $5.45 billion last year, its first annual loss since 1992. In January, Chief Executive Officer William Clay Ford Jr. laid out a plan to cut jobs, close plants and add models to generate pretax profit of $7 billion a year by 2005.

Formula One racing is more popular in Europe than in the U.S., Gillette said. Formula One didn't hold a U.S. race from 1991 to 2000, when its U.S. Grand Prix resumed in Indianapolis. Worldwide, about 250 million television viewers tune in for each of the season's 17 races.

Ford in 2000 renamed its team Jaguar Racing, after one of its luxury brands. The team's only win was in 1999 and it ranks eighth of 11 teams in the manufacturers championship this year with 3 points, compared with 128 for top-rated Ferrari. Teams get points ranging from 10 for a win to one for a sixth-place finish.

Formula One advertises itself as the racing series with the most sophisticated technology, which adds to the cost for participants. Driver salaries also can rival or exceed those of top corporate executives. "If Bill Ford really wants a good paying job, he can be a Formula One driver," Gilmour said.

Management changes

Four executives have run the team under Ford's ownership --Stewart, who stepped down in early 2000; Neil Ressler, a one-time Ford vice president and chief technical officer who retired in early 2001; Bobby Rahal, a former U.S. race-car driver who co-owns a team in Championship Auto Racing Teams Inc. with David Letterman; and Lauda.

Rahal departed following an August 2001 meeting with Wolfgang Reitzle, at the time a Ford group vice president who supervised the automaker's luxury brands. The race team reported to Retizle, and BBC reported at the time that Rahal clashed with Lauda, who had been hired by Reitzle. Reitzle resigned from Ford earlier this year to be CEO of German industrial-gas maker Linde AG.

Jaguar Racing struggled this year because it had to redesign its race cars in the middle of the season. In March, Jaguar considered using last year's cars before deciding to continue using the new cars.

Ford shares fell 12 cents to $12.27. They have declined 22 percent this year.